Accumulate ABB; target of Rs 1249: Prabhudas Lilladher

Prabhudas Lilladher's research report on ABB

ABB reported sales below our and street estimates at Rs20.5bn (PLe: Rs21.4bn), up 4.4% YoY. Sale of Discrete Automation and Motion, Process Automation were up by 3.5% and 22% respectively while sales of Electrification Products and Power Grids were down by 5.6% and 2.2% respectively. Service and exports revenue continue to be strong (15%+ growth YoY) as customers focused on efficiency and productivity of existing operations. EBITDA was down 6.5% YoY at Rs1.4bn (PLe: Rs1.8bn), EBITDA margin came in at 7.1%, down by 82bps YoY (PLe: 8.5%). Interest cost dipped by 29% YoY to Rs178mn leading to PAT growth of 38% YoY to Rs 811mn (PLe: Rs776m).

The stock is trading at 49xCY17E earnings. We believe ABB has consolidated its position over the last few years in terms of capacity and localization and is ready to benefit from market upturn. The company continues to focus on introduction of new products and tailor the technology to meet Indian requirement. We expect stock to deliver 24% earnings CAGR over CY15‐17E. We cut the earnings by 13% for CY16E&17E to factor in lower margins. We Maintain ‘Accumulate ‘with TP of Rs1249 (Previous Rs1403).